Concern about the build-up of Russian troops on Ukraine's border sparked a
sell-off in shares, while gold spiked

Mounting concern that Russia may be preparing to invade Ukraine helped to wipe £11.7bn off the value of Britain’s biggest companies, as investors fled shares and took shelter in safe-haven gold.

The FTSE 100 fell as much as 1.4pc before finishing down 46.32 points, or 0.7pc, at 6,636.16. That slide took Britain’s benchmark index to its worst close since mid-April.

The fall in London was mirrored by stock markets across Europe. The CAC 40 in France lost 0.6pc, Germany’s DAX slid 0.7pc and the Spanish IBEX dropped 1pc.

Wall Street, however, had already fallen sharply overnight on Ukraine concerns ahead of the open of trade in Europe on Wednesday. Both the Dow Jones Industrial Average and S&P 500 stabilised and edged higher.

Gold, which investors buy in times of uncertainty, surged, with the spot price of the yellow metal rising nearly 1.5pc. The flight to safety was also evident in the bond markets, with the yield on 10-year US Treasuries testing its lowest level since May.

Investors were rattled by the build-up of Russian troops near the Ukraine border, which signalled that the crisis in Ukraine could escalate further.

Nato warned that some 20,000 troops were massing along Russia’s border with the strife-ridden country, while Donald Tusk, the Polish prime minister, cautioned that there is a “growing threat of direct Russian intervention” in Ukraine.

“Markets have been shaken by concerns about escalating geopolitical risks,” said Dennis Jose, an equity strategist at Barclays.

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Both the US and European Union have imposed sanctions on Moscow to punish Russia for its intervention in Ukraine. However, President Putin has struck back by banning and restricting agricultural imports from countries that have introduced punitive measures on Russia.

Nikolaos Panigirtzoglou, a market strategist at JPMorgan Chase & Co., said investors were concerned that both Moscow and the West would introducer harsher measures. “There is a risk of more sanctions and counter-sanctions from here,” he said.

Nevertheless, worries about Russia were not the only factor driving European markets lower.

Poor economic data from the Eurozone also hit market sentiment and “accelerated the sell-off”, said Mr Jose of Barclays.

Gross domestic product data from Italy for the second quarter showed the country had unexpectedly fallen back into recession for the third time in six years. The surprisingly poor data pushed the country’s FTSE MIB index down 2.7pc.

Meanwhile, there was disappointing news from the Germany, the eurozone’s biggest economy, with factory orders suffering their heaviest month-on month fall since 2011 in June.

Despite the data, Robert Parkes, a strategist at HSBC, remained relatively upbeat.

“We’ve had some weaker than expected macro data. But on balance, the economic numbers that are coming out of Europe still suggest the recovery is intact, albeit it’s going to be a very slow and gradual one.”